Exercise 10-8 -...

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EXERCISE 10-8 (20–25 minutes) (a) Computation of Weighted-Average Accumulated Expenditures Expenditures Date Amount X Capitalization Period = Weighted-Average Accumulated Expenditures March 1 $ 360,000 10/12 $ 300,000 June 1 600,000 7/12 350,000 July 1 1,500,000 6/12 750,000 December 1 1,500,000 1/12 125,000 $3,960,000 $1,525,000 Computation of Avoidable Interest Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest $1,525,000 .12 (Construction loan) $183,000 Computation of Actual Interest Actual interest $3,000,000 X 12% $ 360,000 $4,000,000 X 13% 520,000 $1,600,000 X 10% 160,000 $1,040,000 Note: Use avoidable interest for capitalization purposes because it is lower than actual. (b) Building. ........................................................................... 183,000
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Interest Expense* .
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Unformatted text preview: ........................................................ 857,000 Cash ($360,000 + $520,000 + $160,000) . ..... 1,040,000 *Actual interest for year $1,040,000 Less: Amount capitalized (183,000) Interest expense debit $ 857,000 EXERCISE 10-9 (2025 minutes) (a) Computation of Weighted-Average Accumulated Expenditures Expenditures Date Amount X Capitalization Period = Weighted-Average Accumulated Expenditures July 31 $200,000 3/12 $50,000 November 1 100,000 0 0 $50,000 Interest revenue $100,000 X 10% X 3/12 = $2,500 Avoidable interest Weighted-Average Accumulated Expenditures X Interest Rate = Avoidable Interest $50,000 12% $6,000 Actual Interest $300,000 X 12% X 5/12 = $15,000 $30,000 X 8% = 2,400 $17,400 Interest capitalized $ 6,000...
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This note was uploaded on 06/06/2010 for the course ACCOUNTING ac505 taught by Professor Khan during the Spring '10 term at DeVry Fremont.

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Exercise 10-8 -...

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